California Community Groups Sound Alarm on Gutting of Decades-Old Community Reinvestment Act. 


SAN FRANCISCO, August 29, 2018 – Yesterday, the Office of the Comptroller of the Currency (OCC), which regulates all national banks, announced efforts to alter the Community Reinvestment Act (CRA) in a way that could threaten tens of billions of dollars invested in low- and moderate-income communities in California. The Advance Notice of Proposed Rulemaking (ANPR) contains recommendations that purport to modernize CRA, but actually make it easier for banks to get away with contributing less to their communities.

“Joseph Otting, head of the OCC, is acting as a lone wolf, without other regulators, in an attempt to weaken this critical law. This is deeply concerning. CRA was created as a response to discriminatory redlining policies in the 1970s and a way to ensure that banks meet the credit needs of the communities where they operate. Weakening this law serves as a giveaway to big banks, which have already benefitted from the Trump administration’s Wall Street-friendly regulators,” said Paulina Gonzalez, Executive Director of the California Reinvestment Coalition (CRC).

Historically, all banking regulators acted in unison to change regulations. For Otting to go his own way raises concerns. Otting was former president and CEO of OneWest Bank, which CRC has alleged, in a pending HUD complaint, practiced redlining and had one of the worst CRA records of all banks in California. At the time, CRC exposed significant problems with the merger of Otting’s OneWest Bank and CIT Group, run by Steven Mnuchin, now the US Secretary of the Treasury.

The ANPR presents questions in a way that seem to lead to a predetermined outcome to weaken CRA, raising questions as to how seriously the OCC will take community feedback. Problematic areas of this release include:

• Claims to address concerns, problems, and business models of today, but in fact threatens CRA’s focus on LMI communities. This jeopardizes the heart of CRA: giving credit for activities that do not benefit historically-marginalized communities.

• Proposes to disconnect CRA from local communities by allowing banks to get credit for activities in areas beyond where the bank typically does business and where there is no oversight to ensure they are meeting community needs.

• Dilutes the effectiveness of CRA by giving more credit for non-LMI activities and extra credit for activities that the bank is already doing. With over 96% of banks already receiving high scores on CRA exams, it is unnecessary to lower the bar even more.

• Proposes a “One Ratio” approach that will be subject to watered down requirements and lack a qualitative analysis of their effectiveness in meeting community needs. There is also a concern that OCC will set an arbitrarily low threshold to make it easier for banks to drift through CRA exams with little effort.

• Risks rewarding banks for activities that can actually harm low-income communities, such as small dollar (payday) loans, or underwriting loans that displace low-income residents in rapidly-gentrifying areas.

• Sets up a system where banks will be held less accountable to the communities where they operate, but will claim to be meeting CRA obligations; and where there will be less lending and investments in LMI communities.

“CRA has been an effective way to hold banks accountable to communities. Any changes to CRA should retain a focus on community participation, identification of local needs, and promote community benefit agreements with banks,” said Elba Schildcrout, Director of Community Wealth at East LA Community Corporation.

“Small businesses in the Central Valley rely on banks for reasonably priced credit to help them start, expand, and hire workers. These changes may dilute banks’ focus on rural communities which will have a devastating effect on small businesses, homeowners, tenants, and community institutions. Anyone who cares about rural America should care about the weakening of CRA,” said Salam Nalia, CEO of Access Plus Capital and CFO of Fresno EOC.

“Homeownership is the key to building wealth in America while closing the wealth gap among people of color and working-class families. Banks are essential to providing financing for homes, and without regulation there is no guarantee that redlining, discrimination, and displacement practices will not continue,” said Nikki Beasley, Executive Director of Richmond Neighborhood Housing Services.


John Hoffman
California Reinvestment Coalition